The Fed cited the 2010 Deepwater Horizon explosion and oil spill, which cost BP $42.2 billion through 2012, as the kind of risk that banks could be exposed to in the future.Â (AP Photo/Gerald Herbert, File)

A Senate hearing Wednesday brought concerns about Wall Street's involvement in and exposure to commerce in physical commodities to the fore of the effort to regulate big banks in the wake of the 2008 financial crisis.

Before Wednesday's hearing held by the Financial Institutions and Consumer Protection Subcommittee about banks' involvement in commodities such as metals, oil and gas, the Federal Reserve issued a notice that it was seeking comment on how to better regulate such activities.

The Fed said recent accidents and disasters have increased the level of concern about banks trying to profit from deals involving commodities. In particular, the Fed cited the 2010 Deepwater Horizon explosion and oil spill, which cost BP $42.2 billion through 2012, as the kind of risk that banks could be exposed to in the future. Banks, because of their size and interconnectedness, represent a threat to the broader economy in case of failure that companies like BP do not.

The Fed also referred to a number of other recent disasters involving companies that mine, produce or transport commodities, including the 2011 Fukushima Daiichi nuclear disaster in Japan and the late December crash of a train moving oil in North Dakota that resulted in the spill of 400,000 gallons of crude oil.

Although bank-holding companies are prohibited from owning or running mines, warehouses or transport facilities, the Fed is worried that banks could run into trouble hiring third parties to move or store commodities for them as part of their commodity-trading activities. And megabanks Goldman Sachs and Morgan Stanley are permitted to transport, store, extract and refine commodities, having been grandfathered in through the Gramm-Leach-Bliley Act, which rolled back the Great Depression-era Glass Steagall Act that prohibited commercial banks from engaging in investment banking.

The feds say their concern is that such activities involve dangers the banks may not understand, meaning that an accident could put the entire company in jeopardy and pose a risk to the broader financial system.

The Fed is seeking comment from banks about if, and how, it should regulate their business in physical commodities.

Michael Gibson, the director of banking supervision and regulation at the Fed’s Board of Governors, testified at Wednesday’s hearing that trading in physical commodities “can pose unique risks” to banks. Understanding the risks of environmental accidents is “an imperfect science at best,” Gibson testified, indicating that regulation may be running behind the banks’ actions.

One of the questions the Fed posed to banks was whether trading in commodities could create a conflict of interest that is not currently addressed by law – that is, whether banks could rig markets.

The Commodity Futures Trading Commission started an inquiry into Goldman Sach’s ownership of aluminum warehouses in Detroit in August, following complaints that the bank had used the warehouses to manipulate prices.

The Fed plans to wait until March 15 for comment, and then will consider issuing a rule.

Critics suggested that in failing to issue a rule now, the Fed, which has been studying the issue for years, is stalling.

Barton Chilton, a CFTC commissioner, called the Fed's request for comments, issued just a day before the Senate hearing, "a tried-and-true D.C. evasion tactic" in an interview with the Wall Street Journal.

Sen. Sherrod Brown, an Ohioan known as a top critic of Wall Street and the chairman of the Senate panel, said Wednesday that the Fed’s move was a “timid step” and “too slow in coming.”

Sen. Elizabeth Warren, a Massachusetts Democrat also known for her advocacy of stringent regulation of banks, called the Fed’s inquiry “certainly a step forward, but a meager one.”